A trader on the Bitfinex exchange looks to have market sold the order book to the tune of around 1,200 BTC (or just under $5 million).
This action sent the price of Bitcoin crashing nearly $100, or around 2.5%, from around $4,000 to $3,900 on the Singapore-based exchange.
In terms of network value for the $70 billion BTC ecosystem, it lost around $1.75 billion in market cap in the space of one minute.
$90,000 in fees for a one-minute dump
It cost the market seller around $5 million in capital to dump the price by 2.5%. If you take the fees paid to market sell (let’s say 0.1%) and the value of the BTC they sold with a max slippage of 2.5% (averagely distributed), you can say that the seller could have paid up to $70,000 in fees (calculated at $5 million x 1.35%).
Also, it must be noted that a 400 BTC market buy bought any bids the market seller stacked on the way up (protecting the $4,000 level). With average distributed bids, this would have cost the market seller around $20,000 in slippage losses for putting up the wall ($1.6 million x 1.25%).
In total, the one-minute pump and dump probably made Bitfinex around $90,000 worth of trading fees.
One possible scenario could have been an OTC deal that was scheduled to take the Bitfinex exchange as a reference rate at the exact time the dump happened. If someone was buying say 100,000 Bitcoins (valued at around $400 million), they could secure a nice discount of around $10 million if the price held down at the level they market sold to.
To get this potential $10 million discount, they would have paid $100,000 in fees – so they would pocket a very nice 100x return on the investment if it worked out and price did not instantly bounce back after the 2.5% dump.
Can it go to the moon?
My final comment on this dump is it took $5 million on one major exchange to make everyone in the ecosystem collectively lose around $2 billion in an instant. I wonder how much money would be required to take this illiquid asset towards the moon (and maybe even back it up on the exchange order books to keep it up there)?
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.